Author Mark Richards
The UK’s Autumn Budget: 22nd November 2017
On Wednesday Chancellor of the Exchequer Philip Hammond delivered a Budget that, he said, would make Britain fit for the future. So what was in the Budget? And will it make the country fighting fit and “ready to seize the opportunities of Brexit?” Or did the Chancellor just give us fiscal facts and figures when what we wanted was a feelgood factor…
Was it just eight months ago that the Chancellor delivered his last Budget speech? After an excited nation endured what seemed an interminable Prime Minister’s Questions, the Chancellor leapt to his feet at 12:39 pm. He hitched up his trousers and launched into the good news about a British economy “which continues to confound those who talk it down.” He was – as he had to be – bullish about the future and determined that the UK should “seize the opportunities” offered by Brexit. Expressing a desire to make the negotiations with the EU a top priority, the Chancellor nevertheless tossed the pro-Brexit wing of his party a £3bn bone with a commitment to prepare for “every possible eventuality.”
He then ringingly declared that Britain was at “the forefront of a technological revolution” – which must have raised a few eyebrows in China and Silicon Valley. Armed with this new technology we would build “a country fit for the future.” And with the ‘mention key strapline’ box well and truly ticked he took a sip of water, politely declined the Prime Minister’s offer of a cough sweet and launched into the numbers – or as he described it, “the part containing the long economic-y words…”
I will not weary you with public sector net borrowing or net debt as a percentage of gross domestic product. If you have trouble sleeping the figures are all online. The key ‘economic-y’ bit to note was that the forecast for UK growth was sharply down. The Office for Budget Responsibility (well-paid people who should know these things) was now forecasting growth for this year of 1.5% compared to the 2% it had forecast in March. “Ouch!” screamed the commentators, furiously typing Hammond Slashes Growth Forecasts headlines.
Hmmm… thought more reasoned people, noting that the Chancellor had said he was going to borrow £49bn this year – £8.4bn less than those well-paid people at the OBR had forecast in March. If the OBR can be 15% out over eight months, perhaps we should not set too much store by their forecasts for 2023.
Meanwhile, inflation would peak at 3% this quarter, said the Chancellor, before starting to fall back to 2%. But in a quiet corner of Threadneedle Street the Bank of England’s bean counters said, no, it will stay around 3% for some time to come.
So what did the Chancellor do for you?
First and foremost if you are on the National Living Wage he gave you a 4.4% pay rise. It will increase from £7.50 an hour to £7.83 from April along with a commensurate increase in the youth rates.
Your personal allowance – the amount you are allowed to earn before you start paying tax – will rise to £11,850 from April and, if you are lucky enough to pay higher rate tax, you will not pay that until you are earning £46,350.
What the Chancellor most emphatically did for you if you are buying your first home was abolish stamp duty. There is now no stamp duty to pay on purchases up to £300,000 and – if you are buying in London – no duty on the first £300,000 up to a £500,000 purchase. This was part of a much wider move to build more homes, with the Chancellor investing £44m in training and education for the construction sector over the next five years and committing to building 300,000 new homes a year by the mid-2020s.
Finally, if you are a young person aged 26-30 then there was good news on travel, as the Chancellor extended the young person’s railcard (which gives one-third off fares) up to the age of 30.
What did he do for business?
In one regard, nothing – which brought a huge sigh of relief from small businesses up and down the country. Despite the Chancellor’s dark mutterings about the registration threshold for VAT only being £15,000 in Germany, Philip Hammond decided to leave the VAT threshold unchanged at £85,000 for the next two years. “A banana skin dodged,” as the BBC’s economics correspondent put it. “A job saved,” as the Chancellor’s wife no doubt thought.
He also announced £500m of extra investment for 5G, broadband and Artificial Intelligence and – probably more importantly – a revision of business rates, which will save businesses £2.3bn. Whether this will allow the high street to compete with online shopping is doubtful (especially with everyone’s inbox flooded with Black Friday deals today), but the move may delay the inevitable for a few years.
What did he do for alcohol and tobacco?
Again, not much – unless you drink white cider. Duty on tobacco went up, as it always does, but duty on alcohol remained frozen. The Chancellor is, however, planning to increase the duty on white cider which (I am reliably informed by my children) is what people use to get very drunk, very quickly.
…And if you are going to drink your alcohol on holiday you will not be paying any more in fuel duty, as the Chancellor froze the duty on short haul flights. It will be paid for by increasing the duty on private jets, so some bad news for Lewis Hamilton in the week he became F1 World Champion.
What did he do for cars?
He announced a £540m investment in the infrastructure required for electric vehicles and an additional tax for diesel vehicles which (from next April) do not meet emission standards. Electric cars are due to be on our roads by 2021 – by which time I suspect that my diesel will have a part-exchange value of nil.
What did he do for education?
Quite a lot. The Chancellor confirmed the commitment to 3m apprentice starts by the year 2020, thanks to the apprentice levy, and announced £20m of funding for Further Education colleges who were introducing the new T (technical) level exams. There would also be £177m to boost the teaching of maths at higher levels – and the Chancellor caved into our pressure! On Monday we bemoaned the lack of computer science teachers: in the Budget, he announced plans to triple the number of computer science teachers to 12,000 (at a cost of £84m) as well as the establishment of a National Centre for Computing.
What did he do for the NHS?
As expected Philip Hammond announced extra money for the NHS, including a £10bn capital investment fund for hospitals up to 2022. There would also be an extra £2.8bn of contingency funding over the next three years with an immediate cash injection of £350m this year: £1.6bn between 2018/19 and a further £850m between 2019/20. Will this avert the winter flu crisis? As I write the weather forecast says it will be a cold December: the Chancellor will be hoping it kills off the germs…
And what did the Chancellor do for takeaways?
He gave a very clear hint that they are going to become more expensive. He has been watching Blue Planet and – like the rest of us – was appalled by the damage plastics are doing to our oceans. Right now he is ‘consulting,’ but you can be certain that a ‘takeaway tax’ will be introduced in a future Budget, aimed at restricting the use of ‘one-time plastics.’
The Verdict: Fit for the future?
Was it a good speech? I think it is fair to say that Philip Hammond is not one of life’s natural public speakers. But like all good actors, having saved the best – stamp duty – for last he got off the stage with the cheers ringing in his ears. Britain was at “a turning point,” he declared, “But we will be looking forward, not backwards.” Having spoken for just over an hour he remembered his strapline one last time – “It is a Budget fit for the future and I commend it to the House” – and sat down to a far better reception than he would have expected at 12:30.